Residual value
Residual value is the estimated amount the entity would currently obtain from disposing of an asset, after estimated disposal costs, if the asset were already of the age and condition expected at the end of its useful life. It reduces the amount allocated through depreciation. Review the estimate as required; a genuine revision changes current and future depreciation rather than automatically rewriting past charges.
Worked example
Cost of $100,000 less residual value of $10,000 gives a depreciable amount of $90,000. Over five years, annual straight-line depreciation is $18,000.
Common mistake
Residual value is not the asset’s current resale price in its current condition, and it is not depreciated.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | F2 | Supporting | July 2027–August 2028 |
| ACCA | F3 | Direct | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | FR | Direct | Official assessment-window verification pending |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| CIMA | F1 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: Scrap value (where appropriate)